Tag Archives: Doha Round

A New WTO Deal

WTO Director General Roberto Azevedo presides over the meeting in Bali, Indonesia.

WTO Director General Roberto Azevedo presides over the meeting in Bali, Indonesia.

After years of stalled negotiations, the World Trade Organization concluded its first trade deal in more than a decade last week. The agreement, signed in Bali, Indonesia, could increase the value of global trade by $1 trillion and create as many as 20 million jobs, according to a report by the Peterson Institute for International Economics. The Bali package would harmonize border standards, making international trade less cumbersome—a process known as “trade facilitation.” It also includes provisions permitting developing countries to expand subsidies to their agricultural sector and provides support for developing countries to implement the trade facilitation provisions. But the agreement has widely been critiqued by development experts, who observe that the key provisions of the Doha Development Agenda—liberalization of agricultural trade, access to essential medicines, and other pro-development trade policies—were not included in the current agreement.

Bali was widely seen as a “make-or-break” moment for the World Trade Organization, which has been stalled since the Doha Round was launched 12 years ago. In the meantime, bilateral trade negotiations have proliferated, threatening to make the WTO less relevant. The agreement is seen as an important boost for the WTO, helping to repair its image in international trade circles. But parties remain very far apart in addressing the most important questions in the Doha Round, and it remains unclear whether or not the WTO will be able to translate the progress it made in the Bali Agreement into a broader consensus on the more complicated—and politically challenging—questions it still must address, including farm subsidies, tariffs on industrial goods, and liberalization of trade in services.

What do you think? Does the conclusion of the Bali Agreement signal a shift towards a more multilateral approach to trade liberalization? Or does the agreement represent the limits of the WTO and reinforce the trend towards bilateral negotiations?

Doha is Dead….Long Live Doha?

Dani Rodrick has an interesting discussion of the World Trade Organization and the Doha Round at his blog this week. Citing comments by Martin Wolf, Rodrick argues that the Doha Round of trade talks is dead, and that continuing to push the round is doing more harm than good. According to Wolf,

Doha was essentially a political response to 9/11. I supported it then because it indicated the global will to co-operate and sustain globalisation. Its chance of completion was in the first few years. Once the political reasons weakened, as they did, after Iraq and then the obvious fact that globalisation was ongoing, the will to complete this round disappeared. Today, no top-level politician would now use his or her desperately limited political capital to complete this round, which they see (rightly) as a low-level priority. After all, are we really living in an era of collapsing trade? Is protectionism rampant? Given the shocks of the last few years, it is almost astonishingly absent.
Then people will say that the WTO will collapse if we don’t keep on doing rounds. I think that’s absurd. Do we think the legal system will collapse if we don’t go on writing more laws? At some point, we were bound to get to the point when a round failed. At some point, we would have to declare an end to rounds. Before 9/11, I thought we were already there. After 9/11, I thought it made sense to have one more go. I was wrong. Doha is weakening the WTO, not strengthening it.
So what now? Make the WTO work in a world without rounds, that’s what. Move on. This is over.

I think that both Rodrick and Wolf are correct in their assessment of the future of Doha. Doha is dead. It’s basically been so since the round was launched in 2001. The inability of contracting parties to arrive at agreement on a number of issues, most notably liberalization of agricultural trade, meant that it was unlike to ever be successful.

But the importance of Doha went far beyond the continued liberalization of international trade. Doha was both the first round launched under the auspices of the World Trade Organization as well as the first concerted effort to address the intersection of trade and development. Doha undertook an ambitious agenda—based in part on the standoff in Seattle in 1999—to address a series of issues with key implications for development in the global south: essential medicines, agricultural trade, trade in services, and special and differential treatment, among others. The collapse of Doha signals to the developing world—as if a new signal were necessary—that the rules of the international trade system are stacked against them, that their interests are not taken seriously in international talks. The WTO can certainly continue in its current form. But the cynicism of the developing countries will rightly be directed towards the organization.

The Challenge of Dumping

Cotton Production

Cotton Production

In international trade law, dumping is defined as selling goods below the cost of production plus transportation and handling. Under World Trade Organization rules, dumping is illegal. But countries continue to engage in the process, as demonstrated by the large number of cases involving accusations of dumping heard by the WTO’s dispute resolution panels.

Perhaps the most high-profile dispute in recent years has been the dispute between Brazil and the United States over U.S. cotton subsidies. Brazil contends (and the WTO panels have upheld twice, first in 2005 and again in 2008) that U.S. cotton subsidies are illegal under WTO rules because the sale of such subsidized cotton represents dumping. The cotton dispute is one of the key sticking points in current Doha Round of WTO talks, as a number of developing countries, including Brazil, have demanded the elimination of U.S. cotton subsidies which depress global cotton prices. According to a report prepared by the International Centre for Trade and Sustainable Development, global cotton prices would be 6 percent higher absent U.S. subsidies. This represents a significant increase in the livelihoods of poor cotton producers in the global south.

A new study, prepared by Timothy Wise for Woodrow Wilson Center, analyzes the impact of agricultural dumping on Mexican farmers under NAFTA.  Looking at agricultural production and trade from 1997 to 2005,Wise concludes that Mexican producers suffered across a number of agricultural sectors, losing some $1.4 billion per year over the course of the study. According to Wise, this represents more than 10 percent of the value of all Mexican agricultural exports to the United States.  Maize production was particularly hard hit, as maize imports from the United States were priced, on average, 19 percent below production costs, leading to a 66 percent decline in real producer prices for maize during the time under study.  Wise concludes that

Mexico certainly serves as a warning to developing countries considering agricultural trade liberalization. The case also highlights the weakness of international rules for defining and disciplining agricultural dumping. That weakness, and the vulnerability of developing-country farmers to import surges, makes all the more reasonable developing-country demands in the stalled Doha Round negotiations for strong Special Product measures to protect key food crops and effective Special Safeguard Measures to protect against import surges. Until agricultural dumping can be disciplined effectively, developing countries must retain the policy space to defend themselves. Mexico gave up most of its defenses under NAFTA. Farmers are paying a high price.

Dumping—or more generally agricultural subsidies and trade—represents one of the key barriers to the conclusion of the Doha Round of international trade talks. Intended to address some of the major imbalances in international trade, the Doha Round was intended to be the first round of international trade talks focused squarely on international development. But differences between the developed world, led primarily by the European Union, the United Sates, and Japan, and the developing world, led by China, Brazil, India, and South Africa, have paralyzed talks since 2008, and the prospect of rekindling talks appears dim. The major outstanding issues remain:

  • Agriculture, especially agricultural subsidies and dumping: Massive subsidies by the United States, Japan and the European Union continue to depress global agricultural prices, undermining production in the global south.
  • Access to essential medicines: Establishing conditions under which developing countries can reconcile meting public health needs with the strong system of intellectual property protections afforded under World Trade Organization rules.
  • Special and Differential Treatment: Determining if developing countries will be afforded different treatment under some WTO rules.

Wise’s full report, Agricultural Dumping Under NAFTA is available online.

Five Stories You Might Have Missed

The political situation in Iran continued to evolve over the past week. Last week, a standoff between President Mahmoud Ahmadi-Nejad and Iran’s Supreme Leader, Ayatollah Ali Khamenei, culminated in the dismissal of two conservatives from the cabinet and the firing of Vice President (and close ally of Ahmadi-Nejad), Esfandiar Rahim Mashaei. The deteriorating relationship between Ahmadi-Nejad and Khamenei further undermines the political stability of Iran, already weakened by June’s disputed presidential elections and the subsequent protests which have rocked the country. Protests have been a regular feature of the Iranian political scene for the past month, including clashes between police and opposition supporters like those that occurred on Thursday.  Although the Iranian government last week released hundreds of people arrested for participating in the post-election protests, the trial of 100 of the most prominent detainees is moving forward. Critics of the regime have condemned the trial as a spectacle.

Meanwhile, three Americans were arrested on Saturday by Iranian security forces for allegedly entering the country illegally.  The three were camping in Kurdistan (near the Iraqi-Iranian border) when they crossed over into Iran. They have been transferred to the capital, Tehran, where they are currently being held.

In news from outside Iran in the last week:

1. Two statements by the Indian government last week dashed hopes of progress in multilateral negotiations. On Wednesday, India’s commerce secretary, Rahul Khullar, dismissed hopes of rekindling World Trade Organization talks as unrealistic in the current global political and economic climate. The current round of talks, referred to as the Doha agenda, has been under negotiation for nine years. The talks have been suspended numerous times, largely as a result of the inability of WTO member states to agree on binding cuts to agricultural subsidies. According to Khullar, progress is unlikely because, in the context of the global economic crisis, political leaders are focused on job losses and the lack of domestic economic growth, a focus which makes it difficult to move forward on a new global trade deal.

In another development, India’s environment minister, Jairam Ramesh, said on Friday that India would not agree to binding emission cuts for at least ten years, potentially throwing climate talks scheduled to take place in Copenhagen in December into disarray. India and China are both dismissive of western pressure to agree to greenhouse gas reductions, believing that such reductions would undermine future economic growth and development in their countries. But without the participation of China and India in climate change negotiations, progress will be far more difficult, particularly given the historical U.S. negotiating position that it will not be bound by any climate change agreement that does not also include reductions for China and India.

2. Over the weekend, Russia concluded negotiations to expand the Russian troop presence in Kyrgyzstan. The expanded Russian presence is part of Russia’s broader effort to reassert itself in its traditional sphere of influence, an effort which included the development of the Collective Security Treaty Organization, a counterpart to NATO which includes Russia and six other former Soviet Republics, Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan, Armenia and Belarus. The United States and Russia have been competing for influence in Kyrgyzstan, which occupies an important geo-strategic position, and Kyrgyzstan’s president, Kurmanbek Bakiyev, has skillfully negotiated between competing Russian and American interests. In February, after receiving $2 billion in aid from the Russian government, Bakiyev ordered the United States to leave Kyrgyzstani bases by June. The bases are part of the U.S. air transit route to supply forces in Afghanistan. After the United States agreed to triple rent payments for use of the base and to offer additional financial assistance to the Kyrgyzstani government, Bakiyev rescinded his request that the U.S. withdraw.

3. Venezuelan President Hugo Chávez has once again sparked widespread criticism, this time among human rights groups. At issue is the latest development in the president’s campaign against “media terrorism”—a new law which would punish journalists and their sources with up to four years in jail for “causing panic,” “disturbing social peace” or compromising national security.

In an unrelated development, the government of Venezuela has “frozen” diplomatic and economic relations with its neighbor, Colombia. Relations between the two countries have been poor since March 2008, when Colombia launched a raid into Ecuador, a close ally of Venezuela. The decision to suspend relations came after Colombia accused Venezuela of supplying rocket launchers to Marxist rebels in Colombia.

4. Clashes between security forces and an Islamist sect in three states in Nigeria continued last week despite the death of Islamist leader Mohammed Yusuf in police custody. More than 150 people have died in five days of fighting in Nigeria, where a sharp economic and political divide between the largely Muslim north and the predominately Christian south has been exacerbated by the country’s declining economic situation. The fighting in the northern part of the country complicates efforts to address the longstanding crisis in the southern, oil producing region of the country, where conflicts between militant separatist groups and the government have continued off-and-on for the better part of a decade. Taken together, these conflicts represent the most significant challenge to the Nigerian government since independence.

5. The International Monetary Fund on Friday issued a statement intended to play down the standoff between the Fund and the government of Iceland. At issue are the conditionalities imposed on the government of Iceland as a requirement for the dispersal of $2.1 billion in IMF loans. The government of Iceland has been under immense political pressure regarding the status of foreign savings deposits in Icelandic banks, which collapsed last year as part of the global economic crisis. The IMF is requiring that the government guarantee all foreign savings deposits, but the government of Iceland has so far refused, bowing to domestic political pressure not to compensate account holders.

The Global Cotton Market

In the aftermath of the collapse of the Doha Round of WTO talks last month, Brazil has decided to move forward with a formal complaint against the United States.  At issue is the very issue that caused the collapse of the talks in the first place: agricultural subsidies.  A decision by the WTO’s dispute resolution panel in 2005 found that three programs intended to support US cotton farmers with price guarantees, credit access, and export subsidies, constituted violations of WTO rules.  After the decision, the United States both announced its intention to abide by and appeal the ruling.  The WTO appellate body confirmed the decision of the original panel, ordering the United States to cease its programs.  (A full background report on the case was issued by the Congressional Research Service).

The appellate body’s ruling now permits Brazil to impose retaliatory trade sanctions against US exports to Brazil up to the amount Brazil has lost due to US programs—an estimated $1 billion.  The breakdown of the Doha negotiations suggests that Brazil may now move forward with that option.

So why all the fuss about cotton subsidies?  The United States is the world’s largest cotton exporters, accounting for approximately 41 percent of global trade.  And subsidies are a big reason why.  Subsidies push global cotton prices down; removal of subsidies would increase cotton prices.  But just how much is debated.  A range of analyses from the UN Food and Agriculture Organization, to the World Bank, to the International Cotton Advisory Committee suggest that removal of US cotton subsidies would increase the per-pound price of cotton anywhere between 5 and 26 percent (or between 2 and 11 cents per pound).

Approximately 10 million people in West Africa alone depend on cotton fir their livelihood.  And as a recent article in WorldView Magazine suggested,

For the cotton-dependent countries of West and Central Africa, 11 cents a pound adds up quickly. Based on this figure, Oxfam America estimated that sub-Saharan African countries lost $350 million due to U.S. subsidies in 2001. Millions of dollars in lost export earnings means less money for basic services: education, health care and debt refinancing.

With the Doha Round now dead, the United States has suggested that it does not need to move forward with plans to reduce cotton subsidies. 

So why don’t African cotton producers just sue the United States?  Therein lies the problem with the WTO dispute settlement mechanism.  While every country is free to participate, it takes time and costs money.  And if you do win your case, the only enforcement mechanism available is countervailing (retaliatory) tariffs.  If the United States wins a case against the European Union, it can impose tariffs on EU exports to the US, making them more expensive.  If Burkina Faso wins a similar case, it can similarly impose retaliatory tariffs on US exports to Burkina Faso.  For the relatively poor countries in the global south, it’s not much of a win…American goods become more expensive in the export market.

The Death of Doha…Finally?

The Doha Round of international trade talks collapsed (again) today.  It seems that the World Trade Organizations Director-General, Pascal Lamy, was a bit too ambitious in hoping that the countries would be able to hammer out a deal.  The Doha Round was supposed to be the “development round” of WTO talks.  Ironic, therefore, that the US is blaming the developing countries, especially India and China, for the collapse of negotiations.

So what really happened?  It seems that countries could not agree on new rules to cover agriculture.  It’s the same thing that’s held up the WTO for years. The United States and Europe refuse to cut agricultural subsidies to their farmers, India and China refuse to cut market protections for their farmers, and so on.  The influence of the domestic farm lobby in many countries is astounding.  Even after the US and Europe announced plans to trim subsidies (largely through a shell game which would mean few real cuts and leave open the possibility of subsidies doubling from current rates, as Alan Beattie notes) China accused US negotiators of hypocrisy in their demands to open markets in the developing world while protecting American cotton farmers through subsidies.  And India’s trade minister, Kamal Nath, accused the US of “self-righteousness”.  Not exactly the stuff of friendly trade talks.

So what remains?  Lamy is hopeful the talks may resume in the fall, but this seems unlikely given political developments in the United States and India and his upcoming reappointment to the WTO’s directorate.  More likely, I think, is an increase in bilateral and regional agreements like NAFTA.  Globalization lite, so to speak.